Can Tyson Foods Investment in Memphis Meats Help Aid Growth?

Tyson Foods, Inc.TSN took yet another step to expand its portfolio of meat products and address the rising protein demand. The leading chicken, meat and prepared foods producer’s venture capital arm – Tyson Ventures made an investment in Memphis Meats, with the deal terms remaining under covers.

Memphis Meats concentrates on developing ways to produce cultural meat directly from animals’ cells without killing them — a method that is not only safer for animals but is also better for the environment and consumers. This food-tech startup intends to use the funds from Tyson Foods to speed up product development. While Tyson Foods now holds a minority stake in Memphis Foods, the latter has attracted many other investors in the past including Cargill, Bill Gates, DFJ, Atomico and Richard Branson.

Tyson Foods’ latest move underscores its constant efforts to expand its protein-rich offerings, as the demand for such products has been growing and is expected to rise further in the times ahead. Alongside the widening demography of protein-savvy consumers, traditional meat sales face intense pressure due to increasing environmental concerns about intensive animal farming and animal welfare. Given these factors, we believe that the aforementioned investment deems fit.

Focus on Protein-Packed Products: A Major Driver

Well, Tyson Foods has long been making efforts to expand protein-packed brands. In this regard, the company’s AdvancePierre buyout favorably impacted the Prepared Foods segment’s performance in the last two quarters. To further enrich the Prepared Foods category, the company announced the buyout of Original Philly Holdings in November 2017. Management continues to expect positive synergies from the acquisitions.

Additionally, the company made investments of $84 million (in August 2017) and $300 million (in November 2017) to expand poultry production capacity in Tennessee. Other than this, the company has also undertaken divesture of non-protein businesses (such as Sara Lee Frozen Bakery, Kettle and Van’s) to focus more on the growing protein-packed food arena.

All said, Tyson Foods seems to be well equipped with the categories that are currently in high demand at the national foodservice chains. Further, the company is set to make significant investments to improve the supply network within the food-service channel.

Notably, Tyson Foods’ top- and bottom-line results have been gaining from such efforts, which have also boosted investors’ confidence in the stock. Markedly, the company’s shares have rallied nearly 28% in a year, surpassing the industry’s upside of 20.5%. We believe that efforts like the aforementioned investment in Memphis Meats, is likely to spur further growth for this Zacks Rank #3 (Hold) company.

Constellation Brands, Inc. STZ, with a spectacular earnings surprise history and a long-term earnings growth rate of 19% also carries a Zacks Rank #2.

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